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Strategic Management & Ethics

1. What are the responsibilities of the board of directors to stakeholders other than shareholders?

2. What ethical issues surround executive compensation? How can we determine whether top executives are paid too much?

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Hi There,
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<br>In general, the board has a responsibility to all its stakeholders. The board's role is to ensure that the company's executive management is acting in the best interests of the company's shareholders. The level of responsibility to the shareholders and other stakeholders is equal in importance. Here is some information that should assist you with your questions regarding the Board of Directors.
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<br>Major Duties of Board of Directors
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<br>1. Provide continuity for the organization by setting up a corporation or legal existence, and to represent the organization's point of view through interpretation of its products and services, and advocacy for them
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<br>2. Select and appoint a chief executive to whom responsibility for the administration of the organization is delegated, including:
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<br>- to review and evaluate his/her performance regularly on the basis of a specific job description, including executive relations with the board, leadership in the organization, in program planning and implementation, and in management of the organization and its personnel
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<br>- to offer administrative guidance and determine whether to retain or dismiss the executive
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<br>3. Govern the organization by broad policies and objectives, formulated and agreed upon by the chief executive and employees, including to assign priorities and ensure the organization's capacity to carry out programs by continually reviewing its work
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<br>4. Acquire sufficient resources for the organization's operations and to finance the products and services adequately
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<br>5. Account to the public for the products and services of the organization and expenditures of its funds, including:
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<br>- to provide for fiscal accountability, approve the budget, and formulate policies related to contracts from public or private resources
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<br>- to accept responsibility for all conditions and policies attached to new, innovative, or experimental programs.
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<br>Major Responsibilities of Board of Directors
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<br>1. Determine the Organization's Mission and Purpose
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<br>2. Select the Executive
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<br>3. Support the Executive and Review His or Her Performance
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<br>4. Ensure Effective Organizational Planning
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<br>5. Ensure Adequate Resources
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<br>6. Manage Resources Effectively
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<br>7. Determine and Monitor the Organization's Programs and Services
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<br>8. Enhance the Organization's Public Image
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<br>9. Serve as a Court of Appeal
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<br>10. Assess Its Own Performance
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<br>More Info:
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<br>POWERS AND OBLIGATIONS OF COMPANY DIRECTORS
<br>1. General Introduction
<br>The powers of the directors are normally those delegated to them by the company. In practical terms the directors of a company can do anything that the company can do. It should be borne in mind that neither the directors nor the company can do anything which is ultra vires; by this is meant beyond the powers of the company. The powers of the company are defined in the Memorandum of Association and contained in what is known as the Objects Clause. In addition, a company obviously cannot do anything which is illegal and the same limitation is placed upon company directors. Once the directors are acting in good faith and doing their best for the company, the company in general meeting does not have power to set aside the day-to-day actions of the directors, provided it can be established that the actions of the directors were within the powers of the directors.
<br>N.B. This does not however make the company powerless in the face of directors. They have a number of options available to them, one option is by special resolution, i.e. a vote of 75% or more of the members in general meeting, where they can amend the Articles of Association and thereby alter thepowers of the directors.
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<br>In addition, it should be noted that directors can be removed from their office as directors by an ordinary resolution, i.e. a vote of 51% or more of the members in general meeting.
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<br>2. Good Faith
<br>Every director has a duty to act in good faith in the interests of the company. Even though the company itself is an artificial legal personality, the duty is still owed to the company, not to the shareholders or creditors of the company, though some duties to creditors and shareholders are in fact imposed by statute.
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<br>3. Conflict of Interest
<br>At all times directors have a duty to avoid conflicts of interest and by this is meant ...

Solution Summary

This problem involves the fundamentals of Strategic Management & Ethics

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